Court Wants Changes for CFPB

Filed in Codes and Regulations, Housing Finance, Legal by on October 12, 2016 0 Comments
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lawThe U.S. Court of Appeals for the District of Columbia on Oct. 11 decided an important case reining in the authority of the Consumer Financial Protection Bureau (CFPB).

In PHH v. CFPB, the court held that the CFPB’s structure is unconstitutional, because it is led by a single director who is not fully accountable to the President of the United States.

To remedy this situation, the court avoided dismantling the agency as a whole by holding instead that the president must be able to remove the CFPB director at any time.

After resolving this constitutional issue, the court ruled on the merits of the case, and, importantly for NAHB members, preserved a longstanding statutory interpretation that impacts marketing service agreements and builder affiliate relationships.

Marketing service agreements frequently consist of an agreement between a home builder or a real estate brokerage and a mortgage company where the builder or real estate broker performs marketing services in exchange for a fee from the lender.

The court preserved the status quo and held that, so long as services are compensated at relevant market rates, these types of agreements and relationships will not be considered unlawful kickbacks under the Real Estate Settlement Procedures Act (RESPA).

CFPB has already expressed its disappointment with the court’s opinion and has said it is considering seeking review of the court’s decision.

NAHB participated as an amicus in this important case to ensure that the court understood the wide-ranging implications of this case on business arrangements that are important to the residential construction industry. For more information, please contact Amy Chai at 800-368-5242 x8232.

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